GTA Service Tax Cannot Be Demanded From Transporter If Recipient Paid Under RCM: CESTAT Kolkata

The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has held that service tax on Goods Transport Agency services was payable by recipient companies under the reverse charge mechanism where they paid the freight.

The court held that demanding the same tax from the transporter again would amount to double taxation where the recipients had discharged the liability.

“Thus, we find that as per notification No. 30/2012-ST, dated 20.06.2012, in respect of transportation of goods by road rendered by the Appellant, the liability to pay service tax is on the receiver of the service, who paid the freight,” the tribunal observed.

The bench comprising Judicial Member R. Muralidhar and Technical Member K. Anpazhakan found that the four recipient companies had paid the freight and fell within the categories covered by the notification. It held that they were liable to pay the tax under the reverse charge mechanism.

“Thus, we hold that demanding service tax from them again would amount to double taxation on the same amount,” the court ruled.

North East Carriers Private Limited had provided transportation of goods by road to Star Cement Ltd., Megha Technical and Engineers Private Ltd., Star Cement Meghalaya Ltd. and Meghalaya Power Ltd. during 2014-15.

The service tax department had confirmed a demand of ₹1,19,50,659, along with interest, under the GTA category. The transporter had produced consignment notes, bills and declarations from the recipient companies showing that they were liable to pay the tax under reverse charge.

The court found that the recipient companies were body corporates covered by the notification and had paid the freight. The declarations also indicated that they had discharged service tax on the transportation services received from North East Carriers.

The court also examined how the original demand had been raised. The show cause notice had initially proposed service tax of ₹4,78,38,635 based on Income Tax Department data without identifying any particular taxable service provided by the transporter. The adjudicating authority later allowed abatement and confirmed ₹1,19,50,659 under the GTA category.

The court found that the department had not investigated the nature and character of the services corresponding to the amounts reflected in the Income Tax Returns. It held that service tax could not be charged merely on the turnover shown in the ITR without verifying whether the appellant had rendered any taxable service.

Since the transporter was registered under the Finance Act, 1994 and the demand was based on ITR data, the court also found no suppression of facts with intent to evade tax. It held that the demand raised by invoking the extended period of limitation was not sustainable.

The court further found that mandatory pre-show cause notice consultation had not been conducted despite the demand exceeding ₹50 lakh. It held that the omission was another ground to set aside the impugned order.

The court consequently set aside the service tax demand, interest and Section 78 penalty of ₹1,19,50,659. It, however, upheld the ₹10,000 penalty under Section 77 for violation of Section 70 of the Finance Act.

The ₹10,000 penalty under Section 77 was upheld, and the appeal was disposed of on those terms.

Counsel for the Appellant: S.P. Siddhanta, Consultant

Counsel for the Respondent: S. Chitkara and A. Mukherjee, Authorized Representatives